AN ASSESSMENT OF THE CAUSES OF NON PERFORMING LOANS IN THE CASE OF WEGAGEN BANK S.C.

Abstract

According to NBE, nonperforming loan means loans or advances where credit quality has deteriorated such that full collection of principal and/or interest in accordance with contractual repayment terms of the loan or advance is in question. Loans with preestablished repayment program are non-performing when principal and/or interest is due and uncollected for 90 (ninety) days or more beyond the Schedule payment or maturity. The major source of income in the Banking sector is interest on loans. However, Banks are continuously reporting substantial amount of nonperforming loans in their annual report. Unless banks have proper procedures and rules that manage their non performing loans, one can expect what the result could be. This particular research paper will attempt to look for the causes of non-performing loan in the case of Wegagen Bank S.C. and will also try to forward possible recommendations based on the findings. The researchers will use the descriptive type research method. Both primary and secondary data will be used. Primary data will be collected through interview and questioner technique. Secondary data will be collected from internet, some selected books, journals, the NBE directives, and annual reports. Data will be collected by using a non-probability sampling technique. The study will have a sample size of 39, which is composed of seven managers, seven loan section heads, sixteen loan officers and nine loan clerks.